Fracking French

That’s right. Shale gas production is the new distraction of the center-right government of Nicolas Sarkozy, the most recent of many populist gambits that seek to reverse Socialist gains ahead of next year’s presidential elections.

It’s a long list and at times Sarkozy picked on legitimate concerns, like Libya, but his timing and populist rhetoric are suspicious, to say the least.

But for the Sarkozy-controlled French Parliament to outlaw fracking, the only way to extract shale gas, is irresponsible. The ruling party has uselessly undermined a nascent European industry with an already uncertain future that will require a decade before commercial production takes place, if at all.

In other words, the decision serves no practical purpose. France wasn’t going to be producing shale gas any time soon, even with government support, because they can’t. Not anytime soon. But it does add economic uncertainty, not only in France, but at the European level.

Companies like Chevron, Exxon, ConocoPhillips, are already treading cautiously -even while paying soaring prices for exploration acreage. To have to also worry about France imposing more red tape at the regional level is unwelcome and unjustified. In contrast, Poland, Bulgaria, the Netherlands, and the UK will push forward to determine if shale gas has a future, while profitability and safety are addressed.

Sarkozy’s anti-fracking legislation is comparable to Germany’s decision to hastily phase out nuclear power, and potentially more damaging because Berlin’s decision was always ideological, while the French leader is justifying his decision on questionable technical grounds.

The Fracking Debate

Perhaps I’ll backtrack just a bit. Fracking is the only way to produce natural gas trapped in shale formations. It involves drilling horizontally and then blasting at high pressure water, sand, and often small amounts of chemicals.

Fracking is not new. It has been done in the US for over 60 years, although the recent boom began almost two decades ago. There are hundreds of thousands of commercially producing fracked wells in America today. And it’s one of the biggest supply growth drivers in the world, certainly in the US.

About a quarter of global recoverable gas reserves are in shale formations. The International Energy Agency expects global unrelenting growth of shale gas production from less than 1 percent currently to 11 percent by 2035. And by then, two thirds of the gas consumed in the US will come from shale formations, and around 80 percent in China.

The shale gas hype has attracted more attention and there are numerous concerns being raised, mostly in the US, about the safety and profitability of fracking, most recently and perhaps most damaging in last month’s New York Times series.
Fair enough. I won’t delve into them because there are dozens of bible-length studies to support or condemn fracking. And decades of experience would point to a safe, profitable business that needs to improve on several fronts, as is expected of any industry.

I’m for transparency and research. It’s in the fracking industry’s best interest to address all concerns that will unavoidably be raised, especially as shale gas has been intrinsically tied to the US and global future in terms of markets stability, energy security, and national security. Suffice to say that the Obama administration’s is counting on shale gas as one of the main contributors to cut oil imports a third in the next decade.

Indeed, shale gas will determine the future of energy one way or another. Countries and markets assume shale gas will increasingly play a positive role in the global energy mix. But if its future is uncertain, then gas and oil market prices will soar, climate change targets will be harder and costlier to meet, energy independence will be a pipe dream, and the transition into a new energy future will fall into question. We are talking about the biggest game changer in energy in decades.

I don’t doubt for a second that some shale gas drilling has been environmentally damaging and even hazardous. So have oil, coal, nuclear, renewable, and any other energy source. It’s not fracking. It’s unscrupulous management of wells. And I can only assume that there has been financial speculation, scheming, and misleading. There are rotten apples like in any other sectors.

Sarkozy vs Europe

But there is simply no convincing evidence to outlaw fracking. Not in France, not in the US, nowhere. There is public concern and governments, regardless whether they are against or for shale gas, have a responsibility to address it. That’s how the system is set up. Most world policy makers are cautious, but Sarkozy ruled fracking guilty before a fair trial.

The UK Parliament reviewed fracking and concluded it can continue. The Netherlands will soon start drilling. Bulgaria said this week it will auction exploration acreage, even if the opposition wants a referendum on the issue. And Poland, which along with France holds the lion’s share of Europe shale gas, will drill at least 120 test wells in coming years.

The cautious approach is justified in Europe because the reality is that shale gas will take years to develop in Europe, not because of politics, but because the industry needs to be developed from scratch. Europe lacks the expertise. Period.

And it’s not as easy as just hiring American companies to do the work. It’s uncertain if there is enough water. Or drilling rigs. Or public incentives. Any discoveries would need to be profitable anyway and that requires at least test drilling (which I think we can assume is sufficiently safe considering the US experience).

A political delay to confirm shale gas is worth investing in won’t affect the European shale gas industry all that much as it resolves the bigger challenges.

That is what makes Sarkozy’s anti-fracking populism all the more irresponsible. It wasn’t necessary. The opposition Socialist Party came out against it, and many French across the political spectrum passionately oppose it, even if it’s never been done in France. But Sarkozy is thinking about the next election, not about French or European energy security or about the economic benefits.

The future of shale gas industry will be determined by its profitability. Any safety issue will be addressed voluntarily or through regulation, in the US and the rest of the world, in the same way all energy industries have over the past.

The same people attacking fracking in France on environmental grounds are demanding a revision of the nuclear industry. Is Sarkozy thinking about shutting down French nuclear plants like Germany after Japan’s nuclear disaster? Of course he’s not.

Let’s just hope Europe’s nouveau populism is exposed as electoral distraction and that the nascent shale gas industry gets a fair chance to prove its worthiness, safely and profitably. If not, it would only be Europe’s loss, all in the name of a new term for Sarkozy.